Visa Inc said on Monday its Initial Public Offering (IPO) could raise up to USD 19 billion -- making it the largest in US history -- even though the credit card processor is entering the market at a difficult time.

The San Francisco-based credit card processor expects to see high demand for its stock, despite the housing-led credit squeeze that is threatening consumers` spending and their ability to keep up with debt payments.

But Visa, like its public rival MasterCard Inc, is a card processor, not a lender, and has a strong presence in other countries where many people are just starting to use plastic instead of cash. And Visa is the largest US card company by market share -- its transactions, in number and dollar amount, in 2006 outpaced those at MasterCard and American Express Co.

Visa said in a Securities and Exchange Commission filing it will offer 406 million shares at USD 37 to USD 42 per share. There will be an option for underwriters to buy an extra 40.6 million shares to cover any excess demand.

The Visa IPO, even if it prices at the low end of the estimated range, would surpass the USD 10.6 billion AT&T Wireless raised in 2000 when it went public. And if demand is strong enough, it could be almost as big as the two largest past deals combined -- AT&T`s offering and Kraft Foods` USD 8.7 billion offer in 2001.

Visa would follow MasterCard from being a privately held interest to a publicly traded company. MasterCard raised USD 2.39 billion in its IPO nearly two years ago.

At a midpoint price, Visa could raise about USD 15.6 billion, or more than USD 17 billion if underwriters exercise their option to buy the entire lot of 40.6 million shares. Even at the low-end price of USD 37 a share, Visa would raise about USD 15 billion.

Shares of MasterCard have risen fivefold since going public and are now trading at more than USD 203 each. But Visa`s offer comes at a time of ebbing appetite for new shares. MasterCard shares have fallen more than 5.5 percent since the beginning of the month.

Visa made its initial IPO filing in June with the SEC. The shares will be listed with the New York Stock Exchange under the ticker V.

Visa will be the last of the major US card companies to go public. Discover Financial Services LLC became publicly traded last July, and since then has seen its shares tumble. But Discover, like American Express, is a true card lender. The responsibility for Visa and MasterCard cardholders` debt, in contrast, is held by the banks that issue them.

For their most recent quarters, MasterCard posted a huge increase in profit while AmEx reported a 10 percent drop in earnings and Discover posted a loss.

A successful Visa IPO would be a boon for member banks including Citigroup Inc, Bank of America Corp and JPMorgan Chase & Co, which have suffered big credit losses and are gearing up for more as consumer credit deteriorates.

More than USD 10 billion of the IPO`s proceeds will go to the member banks. The rest will go toward Visa`s legal costs and general corporate purposes.

Visa boasts the world`s biggest retail electronic payments network. According to its filing, as of Sept 30, banks and other customers said they had issued 1.5 billion Visa cards -- which since 2006 have been advertised through the slogan, "Life Takes Visa."

The latest Nilson Report on card companies said that in 2006, Visa had 44 percent of the US market share in cards and 48 percent of the US market share in debit cards.

Visa said it intends to pay shareholders an annual dividend of 42 cents a share.

Market regulator Securities and Exchange Board of India (SEBI) on Monday banned eight people and six companies, including SMR Universal Infotech, from trading for two years in a case involving false advertisement regarding buy-back of shares in 2002.

These entities have been primarily accused of committing a "fraud on shareholders (of SMR) by first issuing misleading advertisement when they were not eligible or required to make commitment of buy-back as also their failure to take any conclusive action thereon," SEBI said in its order.

Pointing out that the motive behind the advertisement was to deceive the investors by way of disseminating false information, SEBI said: "The process of announcing buy-back of shares and its subsequent withdrawal must have resulted in pecuniary loss to the investors who were influenced to purchase shares on the basis of advertisement."

Indian markets managed to open with decent gap up but did not sustain the momentum on the back of profit booking witnessed across the sectors. But the second half of trade, markets recovered amazingly with amid volatility and ended with handsome gains. Consumer Durables and Banking counters suffered setback on profit taking while Oil&Gas, IT attracted investors. The volatility was largely ahead of expiry of February series derivatives contract and announcement of Union Budget. Selective stocks in agriculture and defence sector witnessed some value buying ahead of expecting more space in upcoming budget. Much awaited bonus issue on R-Power traded well and ended above the issue price. Momentum recovered in the mid session amid volatility and ended with handsome gains. Good amount of short covering was seen in the late trade. Cues from the Asian and European markets were encouraging. Heavyweights in Cement, Software and Power sectors aided the indices, Midcaps and small caps were in pressure, ended in red.

KS Oil was the stock on lime light. KS oil is one of India?s leading manufacturers of mustard/rapeseed oils with a strong position in the refined oils and vanaspati segments and well positioned to capture an opportunity in the fast-growing branded edible oil segment, which is growing at 25-30% p.a. KS Oil has reported that it is expanding its capacity by adding five new plants, of which three will be functional in FY09E and the rest in FY10E. This will significantly spurt its crushing, solvent extraction and refining capabilities by 5 times of FY07 capacity. Higher capacity should lead to 80% CAGR growth in crude mustard oil production which should be the primary driver of sales growth. The story remains in the demands scenario appears to be an attractive investment option. We have call running in delivery delights services and performing well. The stock ended up by 12%.

Ambuja Cements reported that it is expanding its cargo fleet by adding three ships by the next year for an investment of Rs 150 cr for the internal movement of the construction material to tap the growing demand of cement in the country while containing costs. Out of the three ships, two ships will have carrying capacity of 4,000 DWT (deadweight tonnage) and one will be of 2,800 DWT. The ships would primarily cater to cement distribution for the domestic market. At present, the company has a fleet of seven cargo ships for domestic as well as export use. This expansion is meant for domestic distribution. It will be ready for operation by next year. These moves are in line with the company's earlier announced Rs 3500 cr capacity expansion drive. Stock ended up by 5.4%.

Centurion BoP approved merger with HDFC Bank after which the stock traded down. HDFC Bank and Centurion BoP boards have given in principle approval for merger. They have finalized swap ratio of 1 share of HDFC Bank for every 29 shares of Centurion BoP. The combined entity would have a nationwide network of 1,148 branches (the largest amongst private sector banks), a deposit base of around Rs 120000 cr and net advances of around Rs 85,000 cr. The balance sheet size of the combined entity would be over Rs 150000 cr. HDFC Bank & Centurion BoP Merger is positive keeping Long-term view. Stock ended down by 3.6%.

Technically Speaking: Markets traded firm through out the day. Sensex made an intraday high at 17674 and low at 17137. Broader markets underperformed the frontline counters once again and on the volume front it was a modest day. The overall market breadth was positive with gainers outnumbering losers. Sensex remains range bound and in a Flag formation. The range is 16900 -17900. A break out in each of this direction could result in further acceleration in that direction. Volumes remain low and that means disinterest. Markets are in a consolidation phase and looking for direction.

The market closed on a strong note on the back of heavy buying across the sectoral indices. Taking the favoring cues from the global markets, the domestic market opened with a bang but unable to sustain at higher levels and fell immediately as the profit booking prevailed. Then after the mid session, the market got the momentum to came off from the day''s low and marched forward till the final closing of the session. Reliance Power remained in the lime light during the trading session as the company''s board approved the proposal to issue bonus shares to all categories of shareholders excluding promoters in the ratio of 3 shares for every 5 shares held. From the sectoral front, the Oil & Gas, IT, Metal and Realty stocks remained in the lime light as most buying was seen from these baskets. The BSE Sensex closed higher by 301.50 points at 17,650.57 and NSE Nifty closed up by 89.95 points at 5,200.70. The BSE Mid Cap and Small Cap closed lower by 0.04 points and 69.13 points at 7,594.41 and 9,526.28 respectively.

The market witnessed a dramatic turnaround in mid-morning trades and rallied sharply over 500 points to touch the day's high of 17,674 towards the close. The market remained firm for better part of the trading session, as positive Asian markets created a perfect platform for the bulls to pursue buying. The Sensex resumed 175 points higher at 17,524, but shed over 211 points to touch the day's low of 17,138 amid heavy selling in banking and consumer durable stocks. However, the index rolled back into the green on buoyancy in heavyweight, oil, and IT stocks. The Sensex finally closed the session with gains of 1.74% and was up 302 points at 17,651, while the Nifty advanced 1.76% and was up 90 points to close at 5,201.

Reliance Power was the most actively traded counter on the BSE with a turnover of Rs782 crore followed by Tulsi Extrusion (Rs465 crore), IRB Infrastructure (Rs296 crore), RNRL (Rs241 crore) and Reliance Capital (Rs218 crore).

The key benchmark indices, which opened with a positive gap but soon turned weak amid high volatility in eary trade, bounced back strongly in afternoon trade on account of sustained buying in oil & gas and information technology stocks.

The European markets, which opened after Indian markets, were strong. Most of Asian markets, which opened before Indian markets, ended in green.

Reliance Power surged 8.05% to Rs 450.40 on BSE, above its issue price of Rs 450 offered during recently concluded public issue

This is the first time the stock is trading at premium as compared to issue price of Rs 450 per share. On its listing on 11 February 2008, the stock debuted on 11 February at Rs 547.80 and hit a high of Rs 599.90. However barely within minute of its debut, it started declining and slipped to discount. The stock surge today after its board-approved issue of three bonus shares for every five held, to compensate for the slump in the stock price post listing.

The Reliance Power counter saw high volumes of 1.77 crore shares on BSE.

The market breadth was weak. 26 stocks from 30-member Sensex pack were in the green.

The 30-share BSE Sensex ended up 301.50 points or 1.74% at 17,650.57. It opened with a positive gap of 174.74 points. It hit a high of 17,674.06 in late trade. At day’s high Sensex gained 324.99 points. It hit a low of 17,137.99 in mid-morning trade. At the day’s low, the Sensex lost 211.08 points.

The broader based S&P CNX Nifty was up 89.95 points or 1.76% at 5,200.70.

Nifty February 2008 futures were at 5203, at a premium of 2.30 points as compared to spot closing of 5200.70.

India’s largest truckmaker by sales Tata Motors rose 1.53% to Rs 705.35. It has reportedly started the process of raising nearly $2.5 billion, mostly from the overseas markets, by giving the mandate to a group of banks. A large chunk of this fund is expected to be utilised to purchase luxury British brands Jaguar and Land Rover from the US carmarker Ford, the reports added.

India’s largest IT exporter by sales Tata Consultancy Services declined 0.29% to Rs 900.05. The company and the Nasdaq-listed Cognizant are reportedly in a race to acquire the billion-dollar systems integration business (SI) of Germany-based T-Systems. T-Systems is the IT solutions unit of Deutsche Telekom, Europe’s telecommunications giant.

India's biggest power equipment maker by sales Bharat Heavy Electricals rose 1.27% to Rs 2,085.10. The company and Nuclear Power Corporation of India (NPCIL) are reportedly planning to float a joint venture to take up construction activities for nuclear power plants. At present, NPCIL generates about 3,900 mega watts (MW) of electricity from its 16 power plants. The company plans to more than double its capacity to 10,000 MW over the next six years.

Banking stocks recovered. Indian bank unions called off a planned two-day strike that was due to start on Monday after the unions and banking officials decided to meet next month to resolve their differences.

HDFC Bank declined 3.54% to Rs 1,422.70.The Board of Centurion Bank of Punjab (CBoP) at the meeting held on 23 February 2008, has given an in-principle approval for a merger of CBoP with HDFC Bank. The board of CBoP will meet on 25 February 2008 to consider the terms of the merger including swap ratio after receipt of the valuation reports. Centurion Bank of Punjab declined 14.45% to Rs 48.25.

Among the other banking sector stocks, State Bank of India (up 0.61% to Rs 2,127.55) and ICICI Bank ( up 0.97% to Rs 1,110.05) edged higher.

European markets were strong. France’s CAC 40, Germany’s DAX and UK’s FTSE 100 were up between 1.18-1.79%.

US stocks rallied late on Friday on news that banks were near an agreement to bail out bond insurer Ambac Financial, a deal that could prevent further damage to the banking industry and credit markets. After trading in negative territory for most of the session, US stocks turned positive in the last half hour after reports of a bank rescue may come as soon as next week.

The Dow Jones industrial average rose 96.72 points, or 0.79 %, to end at 12,381.02. The Standard & Poor's 500 Index gained 10.58 points, or 0.79 %, to 1,353.11. The Nasdaq Composite Indexadded 3.57 points, or 0.16 %, to 2,303.35.

Inflation based on the wholesale price index (WPI) rose to 4.35% for the week ended 9 February 2008 from 4.07% in the previous week, data released by the government today showed.

Undeterred by a dismal performance of Reliance Power IPO, which it attributes to abnormalities in the equity market, Anil Ambani Group Sunday said it will go ahead with listing plans of its other firms.

The firm has lodged a complaint with market regulator Securities and Exchange Board of India, seeking investigation in "price hammering" of its shares since listing on February 11.

"The fact that seven Mauritius-based FIIs sell in a falling market has got to do something more than that meets the eye," group chairman Anil Ambani told reporters here.

"Our common complaint to SEBI is price hammering where within four minutes of listing, the stock price comes down from Rs 540 to rs 380," he said.

The scrip, after listing at Rs 547.8, slid into red within a minute and closed at Rs 372.5, a level much below the issue price. Investors in the company lost over Rs 1,700 crore on February 11, the day the scrip debuted on the stock exchanges.

On whether he would go slow on listing other group companies such as Reliance Infratel, he said: "there is no rethink on the issue. A DRHP has been filed. We will wait for the right time."

The group had raised USD 3 billion through the Reliance Power IPO - the largest in the country. It has also filed draft papers for initial public offer of Reliance Infratel, a subsidiary of Reliance Communications.

The company proposes to raise Rs 6,000 crore through the offer with an issue of 8.91 crore shares, representing about 10.05 per cent equity in Reliance Infratel. The issue proceeds are proposed to be utilised toward funding development of passive infrastructure and general corporate purposes.

The modest rally in the US markets and a rise in several Asian indices in the ongoing trading session may help the domestic indices pull-back from lower levels. However, lack of clarity in the market and volatility may drag down the market. Among the indices, the Nifty could face a resistance at 5,500 level and has a likely supports at 5,040 level.

US indices bounced back moderately and finished higher on Friday, helped by the report stated that troubled bond insurer Ambac Financial could see a bailout as soon as next week. While the Dow Jones moved up by 97 points at 12,381, the Nasdaq managed to add four points at 2,303.

Barring MTNL, all the Indian floats slipped on the US bourses. ICICI Bank tumbled up by 4.60% and HDFC Bank slipped 2.63% , while Dr Reddy's, Tata Motors, Infosys, Patni Computer and Rediff were down by 0.5%-2% each.

Crude oil prices rose marginally, with the Nymex light crude oil for April delivery gaining by 58 cents to close at $98.81 a barrel. In the commodity space, the Comex gold for April delivery slipped by $1.40 to settle at $937.80 an ounce.

We recommend a buy in Pfizer from a short-term perspective. From the chart, we see that it had been on a medium-term downtrend from December 2007 high of Rs 850 to mid-February low of Rs 587. However, the stock’s medium-term downtrend got arrested at around Rs 600 more recently and the stock reversed the direction. The positive divergence in the daily momentum indicator supports the stock’s reversal trend. The daily momentum indicator has entered the neutral region from the bearish zone. We see that the current upmove has breached the medium-term down trendline. We also notice a crossover in the daily moving average convergence divergence, which indicates establishment of bullishness. Our short-term outlook for the stock is bullish. We expect the stock’s ongoing rally to continue to our target price of Rs 700 in the short-term. Investors with a short-term perspective can buy the stock while keeping the stop loss at Rs 587 levels.

Market is expected to edge higher today backed by strong Asian markets. US stocks rebound late on Friday on positive news for the banking industry will further boost the sentiments.The market may see a pre-budget rally. The market may also see some upside from short covering ahead of the expiry of February 2008 derivatives contracts on Thursday, 28 February 2008.

The Union Budget 2008-09, to be presented by Finance Minister P Chidambaram on Friday, 29 February 2008, will be one event that market will look forward to in this week

Apart from the budget, another trigger for the market is prospects of further softening of interest rates by the US Federal Reserve.

Market is expecting a populist budget from the United progressive Alliance (UPA) government this year, considering that the parliamentary elections are due in 2009. Thus, the Finance Minister is likely to provider higher allocations to several social initiatives like rural upliftment, employment, education, agricultural growth and public health.

If the budget is market friendly, the sentiments may turn positive in the immediate term at least. Expectations are that the corporate income tax rate may be cut or the 10% surcharge on corporate tax may be abolished. Another possibility is that of a cut in dividend distribution tax from 15% to 12.5%. Meanwhile, FM may raise the Securities Transaction Tax slightly.

Meanwhile, as per reports, railway minister Lalu Prasad in his Railway budget to be presented this week, is likely to reduce both passenger fares and freight rates, riding a strong revenue growth and reduced operational costs. Rail fares are likely to be cut by 3% to 5% while freight rates for petroleum, steel and iron ore may come down by 4% to 5% due to reclassification of goods.

U.S. stocks rallied late on Friday on news that banks were near an agreement to bail out bond insurer Ambac Financial, a deal that could prevent further damage to the banking industry and credit markets. After trading in negative territory for most of the session, US stocks turned positive in the last half hour after reports of a bank rescue may come as soon as next week. The Dow Jones industrial average rose 96.72 points, or 0.79 %, to end at 12,381.02. The Standard & Poor's 500 Index gained 10.58 points, or 0.79 %, to 1,353.11. The Nasdaq Composite Indexadded 3.57 points, or 0.16 %, to 2,303.35.

The Indian Market is likely to have a positive opening as the cues from he global markets are in favor. On Friday, the market closed on a disappointing note with heavy losses across the sectoral indices. Taking the negative cues from the global markets, the domestic market opened with a heavy gap down and kept on hovering in the negative territory through out the trading session. Lack of investor''s interest in buying to book their positions led the frontline indices to close in the negative territory. Also, the weekly inflation figures that rose 4.35% for the week ended February 9, 2008 from 4.07% last week also add to the negative sentiments in the market. Also, the Union Budget 2008-09 due next week on Feb 29 led the investors to take calculative steps to book their positions. The BSE Sensex closed lower by 385.61 points at 17,349.09 and NSE Nifty closed down by 81.05 points at 5,110.75. We expect that the market may gain some grounds during the trading session.

Reliance Power''s board yesterday approved the proposal to issue bonus shares to all categories of shareholders excluding promoters in the ratio of 3 shares for every 5 shares held. This offer will reduce the cost of its share below the issue price to Rs269 per share for retail investors and Rs281 for other investors.

On Friday, the US market was closed in positive territory. The Dow Jones Industrial Average (DJIA) closed higher by 96.72 points at 12,381.02. S&P 500 index closed up by 10.58 points at 1,353.11 and NASDAQ grew by 3.57 points to close at 2,303.35.

Today, the major stock markets in Asia are trading strong. Japan''s Nikkei is trading higher by 279.89 points at 13,780.35 along with Hang Seng trading up by 100.32 points at 23,405.36 and Taiwan Weighted trading at 8.293.21 up by 184.50 points.

Today, Nifty has support at 5,096 and resistance at 5,311 and BSE Sensex has support at 17,392 and resistance at 18,139.

Reliance Power shareholders should be somewhat relieved that a bonus of 3:5 has been announced. Reliance Energy may have nothing to lose because Anil Ambani has decided to let his personal holding in Reliance Power fall to 40%from 45% to enable Reliance Energy's stake in Reliance Power to be maintained at 45%. While many will cheer this gift or sacrifice, there are others who feel the promoters invested just Rs2,000 crore and post-listing the value moved to around Rs75,000 crore. So giving away Rs5000 crore need not be cheered.

Whatever anyone may say, the ADAG group of stocks look set for a decent run at least at start. Then we have HDFC Bank all set to Centurion Bank of Punjab in an all-stock deal. The swap ratio is 1 share of HDFC Bank to every 29 shares of CBoP.

Given the global cues, we can expect a better opening. But the recent trading sessions have shown that there is tremendous resistance at higher levels. A rescue plan for bond guarantors has kept global markets positive. Reports state that New York-based Ambac Financial Group Inc. will get new capital to salvage its AAA credit rating, averting further writedowns for global financial companies.

Infrastructure Developers Ltd, which raised about Rs9.44bn through its IPO last month, will list on the bourses today. The company has fixed the issue price at the lower end of price band of Rs185-220. IRB Infrastructure offered 51mn equity shares through the IPO, constituting 15.36%of its fully diluted post issue paid-up capital. The issue got subscribed by over four times

Japan's Nikkei 225 Stock Average climbed 2.4 percent to 13,827.16. Indexes also gained in South Korea, Australia and New Zealand. The Philippines is closed for a holiday.

U.S. stocks rallied in the final 30 minutes of trading on Feb. 22, helping the Standard & Poor's 500 Index climb 0.8 percent.

Future Ventures India, the VC arm of Future Group, likely to come with an initial public offer of around Rs38bn.

M&M plans to launch a premium SUV codenamed ‘W201’ by 2009 and the Ingenio MUV by end August of this year.

DoT draws up priority list for new telecom license holders; Datacom Solutions, in which Videocon’s Venugopal Dhoot holds a stake, has topped the list of companies in terms of precedence in converting its LoI into a license

Indian Oil Corp is on the look out to acquire stakes in oil sand blocks in Canada.

GSK Pharmaceuticals plans to launch four drugs in India within the next three months.

Reliance Retail is in talks with UK’s Mark & Spencer to float an equal JV.

Markets erase gains

Markets erased all its previous session gains as traders and investors preferred to book profits and enjoy the weekend. After a negative start, key indices struggled for any clear direction throughout the day. Unless selling intensified towards the end of the days, which was seen in the Banking, IT and the Oil & Gas stocks. Finally, the 30-share Sensex closed at 17,349 losing 385 points. The NSE Nifty closed at 5,110 dropping 81 points.

Among the 30-scrips of Sensex, RIL, ICICI Bank, Infosys and HDFC Bank were among the major laggards. However, Cipla, Hindalco and Maruti bucked the trend being among the only gainers in the index.

Garware Offshore was up by 3% to Rs214. The company announced that it entered into a Memorandum of Understanding (MoU) for the acquisition of one Anchor Handling Tug Cum Supply Vessel (AHTSV) of 60 Tons Bollard Pull fitted with Fire Fighting Equipment (FIFI 1) and Dynamic Position System (DP1). The scrip touched an intra-day high of Rs230 and a low of Rs201 and recorded volumes of over 14,000 shares on NSE.

ICSA India was up by 1% to Rs457 after the company announced that it won Rs439.7mn order. The scrip touched an intra-day high of Rs469 and a low of Rs436 and recorded volumes of over 22,000 shares on NSE.

Suzlon slipped 1.5% to Rs303. The company announced that it would t spend $1bn on India expansion over three years. The scrip touched an intra-day high of Rs307 and a low of Rs300 and recorded volumes of over 18,00,000 shares on NSE.

Glaxo Pharma gained over 2.3% to Rs953 after the company announced its fourth quarter results with a net profit of Rs809mn for the quarter ended December 31, 2007 where as the same was at Rs677.90mn for the quarter ended December 31, 2006. Total Income is Rs3679.40mn for the quarter ended December 31, 2007 where as the same was at Rs3424.30mn for the quarter ended December 31, 2006. The scrip touched an intra-day high of Rs965 and a low of Rs920 and recorded volumes of over 73,000 shares on NSE.

Rain Commodities gained by 1% to Rs191 after the company is considering starting plant in China. The scrip touched an intra-day high of Rs193 and a low of Rs187 and recorded volumes of over 44,000 shares on NSE.

Sakthi Sugar lost 1.8% to Rs81. The company announced that its European unit has acquired Arvika Gjuteri. The scrip touched an intra-day high of Rs86 and a low of Rs81 and recorded volumes of over 11,00,000 shares on NSE.

News Snippets:

SAIL forms a JV company with Jaiprakash Associates to set up a 2.1mn ton cement plant in Bokaro, with an investment of Rs4.1bn.(BL)

- NHAI awards five projects worth Rs109bn for six-laning of highways under NHDP-V to infrastructure developers, including L&T, IRB among others.(DNA)

Bullion metals ended mixed on Friday, 22 February, 2008 due to some profit taking issues. Silver rose but gold dropped. But at the end, gold registered good gains for the week. Gold generally moves in the opposite direction of the U.S. currency. Gold, as a dollar-denominated commodity, suffers from dollar strength.

Comex Gold for April delivery fell $1.4 (0.12%) to close at $947.8 an ounce on the New York Mercantile Exchange. On Thursday, 21 February, prices hit a high of $958.4. This year, prices have gained 13.5% till date. In January, prices gained 11%, the highest monthly gain since April 2006.

For the week ending on Friday, gold gained $41.5 (4.6%). Prices increased due to the slumping dollar and supply issues at South Africa. Gold prices rise with falling dollar as inflationary concerns boosts the metal's appeal as an inflation hedge.

Comex Silver futures for March rose by 9 cents (0.5%) to $18.04 an ounce. Silver has gained 18.8% in 2008. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years. In January this year itself, prices climbed 14%.

Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices. Rising crude increases inflationary pressures and vice versa. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.

At the MCX, gold prices for April delivery closed higher by Rs 9 (0.07%) at Rs 12,084 per 10 grams. Prices rose to a high of Rs 12,134 per 10 grams and fell to a low of Rs 11,970 per 10 grams during the day’s trading.

At the MCX, silver prices for March delivery closed Rs 146 (0.6%) higher at Rs 22,951/Kg. Prices opened at Rs 22,870/kg and went to a high of Rs 23,150/Kg during the day’s trading.

Crude prices ended higher for the week that ended on Friday, 22 February, 2008. Prices ended higher by $3(3.1%) near $99/barrel. Price ended twice more than $100/barrel during the week.

Initially during the week, prices rose after comments from Organization of Petroleum Exporting Countries (OPEC) officials hinted a production cut in the near term. But then, in the later part, prices fell after an Energy Department report showed that U.S. inventories rose almost twice as much as forecast in the last week, as refineries slowed processing to perform seasonal maintenance.

For the day ending Friday, 22 February, crude-oil futures for light sweet crude for February delivery closed at $98.81/barrel (higher by $0.58 or 0.56%) on the New York Mercantile Exchange for the day. Prices fell to $97.6 and rose to $100.01 during intra day trading. Earlier in February, prices had slipped to $87/barrel.

On Friday, 22 February, prices increased due to cold conditions prevailing in the North East of US. But market pared gains due to bleak economic condition of the country.

As per the weekly inventory report by EIA on Wednesday, crude inventories rose 4.2 million barrels in the week ended 15 February outstripping the increase of 3.2 million barrels that market expected. On the demand side, EIA reported motor gasoline demand has averaged 9.0 million barrels per day, or 0.5% above the same period last year. Distillate fuel demand has averaged 4.3 million barrels per day over the last four weeks, down 1.9% compared to the same period last year.

EIA also reported that Gasoline supplies rose by 1.1 million barrels in the latest week, while distillate stocks fell by 4.5 million barrels. Total petroleum inventories, including crude oil, gasoline, and diesel, decreased by 3.7 million barrels last week, but they are still in the upper half of the average range for this time of year.

Last weekend, Iranian oil minister said that reducing production is very normal for OPEC in March. Iran is OPEC’s second largest oil producer.

Prior to that, two ministers of OPEC hinted that the cartel might go for a production cut in its next meeting at March, 2008. At its 1 February meeting at Vienna, OPEC members decided to keep current output levels unchanged.

In a monthly report released earlier this month, EIA said the world oil market is poised to ease over the next two years with production increases offsetting moderate growth in oil demand.

Assuming market perception of Reliance Power Ltd’s firm value hasn’t changed from the pre-bonus announcement levels of Rs86,897 crore, the company’s shares could jump as much as 39% on Monday from last week’s close of Rs417.What the 3:5 selective bonus issue essentially means is that non-promoter or minority shareholding would increase from 10.09% to 15.22%. Their stake is now worth Rs13,226 crore and since the shares trading in the market currently are cum-bonus, each share would be worth Rs580 (minority shares stand at 228 million). As a result, retail investors who have held on to their share will gain about 35%, while other investors will gain 29%.

Bridging the Gap

High net-worth investors who borrowed funds to buy shares in the initial public offering would manage to break even since their cost of acquisition was about Rs560 per share. But most of them tend to book losses on listing.While arbitrageurs will rush in to bridge the gap between Friday’s close and the sudden change in the cum-bonus share value, they would also be mindful of the short-term capital gains tax of 10%, due to which Reliance Power shares may trade slightly lower. Once the bonus issue becomes effective, 136.8 million new shares will be issued to minority shareholders, which means the ex-bonus share price should be around Rs362.

As pointed out right at the outset, these calculations depend on the assumption that Reliance Power deserves a value of Rs86,897 crore, the level it traded at before the bonus issue was mooted. This may not necessarily be the case, especially after reports late last week that the government of Haryana has imposed damages on Reliance Energy Ltd for its failure to meet a deadline for a 600MW thermal power plant. Reliance Power, which is involved in ­larger projects, gets a large part of its value because of assumptions of timely ­execution.

Leave alone penalties from authorities, if projects are not completed on time, estimates of cash flow will go awry and firm value will deteriorate. Those waiting to jump in and gain from the lucrative bonus issue should be mindful of this risk.Reliance Energy shareholders, too, have some reason for cheer. It was first assumed that its stake would reduce owing to the bonus issue to only minority shareholders, but it now turns out that its stake will be maintained at 44.96%. In that case, the 9% erosion in its value last week seems overdone, and its shares should also rebound, unless reports about the penalty in Haryana continue to weigh down valuations.

While public shareholders in Reliance Power have reason to rejoice because of the liberal bonus issue, the attached table shows that it hardly cost promoters anything. Anil Ambani’s investment in the firm has been all of Rs1,720 crore. Even after the dilution in his stake owing to the selective bonus issue, his shares are still worth Rs34,600 crore